AILSA CHANG, HOST:
The new chairman of the Federal Reserve is vowing to put high inflation in the rearview mirror. Fed Chairman Kevin Warsh testified before the Senate Banking Committee today for the first time since taking over at the central bank. Warsh also talked about the job market and possible fallout from the artificial intelligence boom. For more, we're joined now by NPR's Scott Horsley. Hi, Scott.
SCOTT HORSLEY, BYLINE: Hi, Ailsa.
CHANG: Hi. OK, so let's start with inflation because Warsh got a bit of a break on inflation this week, right?
HORSLEY: Yeah. We got some encouraging news this week about prices at both the retail and the wholesale level, and both look a little better in June than they did the month before. That was largely thanks to a drop in energy prices last month resulting from the ceasefire in the Strait of Hormuz. Of course, tensions in the strait have rekindled in July, so now energy prices are going up again. And even if you strip out energy prices, overall inflation is still too high. It's been high for more than five years now. And Kevin Warsh told senators this morning, if he and his colleagues do their jobs right, they will wrestle prices under control.
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KEVIN WARSH: My colleagues and I recognize that high inflation has been an undue burden on American households and businesses. The members of our committee have no tolerance for persistently elevated inflation, and we share a resolute commitment to restore price stability.
HORSLEY: Warsh and his Fed colleagues are set to meet in a couple of weeks to discuss interest rates, and they are widely expected to keep their benchmark rate relatively high for now to prevent inflation from picking up any more steam.
CHANG: Yeah, but President Trump, I mean, he's been outspoken in demanding that the Federal Reserve lower interest rates. That's a big reason why he chose Warsh for this job, right? So did Warsh talk about specifically what he's going to do with those rates?
HORSLEY: Not really. You know, the Fed's main weapon for fighting inflation is keeping rates high. So Warsh doesn't sound like he's in a hurry to cut interest rates. But that said, he has generally tried to avoid signaling what his rate plans are. Unlike his Fed colleagues, Warsh did not offer a projection last month of where he thinks interest rates are going. And today, he ducked a question from Democratic Senator Chris Van Hollen about whether he's even spoken to Trump about interest rates. All he would say is he's not taking orders from the White House.
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WARSH: They chose an independent guy to do an independent job, and that's exactly what I plan on doing.
CHRIS VAN HOLLEN: OK.
WARSH: And I'd like to think over the last seven weeks, given the decisions we've made and the things we've done, that it's not just words. It's actions now to start to demonstrate that.
HORSLEY: Warsh's predecessor at the Fed, Jerome Powell, was also picked by President Trump, but Powell eventually came under heavy criticism from the president for exercising that similar kind of independence.
CHANG: Yeah.
HORSLEY: So far, Trump has not gone after Warsh, but of course, he's only been on the job for a couple of months.
CHANG: Yeah, and what has Warsh been up to during that time?
HORSLEY: Well, he does want to make some changes at the Fed in things like how the central bank communicates, how it measures inflation. He moved quickly to set up several task forces led by outside experts to advise some changes. One of those is charged with looking at artificial intelligence and the boom in investment there, which Warsh calls the most consequential change in his lifetime. He's generally bullish about the opportunities AI will bring, but he acknowledged there could be some pain along the way.
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WARSH: I believe that this is a long-term job creator, but will it be disruptive, and will some people have their jobs at jeopardy because of the new technologies? On that, I can't offer any sort of guarantee or comfort.
HORSLEY: The Fed's two main jobs are fighting inflation and boosting employment. AI has the potential to affect each of those in different ways. The task force is supposed to untangle those possibly competing effects and make recommendations by the end of this year.
CHANG: That is NPR's Scott Horsley. Thank you, Scott.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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